Tuesday, November 27, 2012

Taleb Mishandles Fragility

Christmas traditions have gone from stockings and exchanging gifts, to fruitcakes, bad sweaters, NBA games, and now Taleb books, a sign that perhaps the Mayan return isn't so much an apocalypse but rather a mercy killing. Taleb is one of many best-selling authors I don't enjoy (Tom Friedman, Robert Kiyosaki, Snooki), but as he is prolix, pretentious, petulant and clueless, I enjoy commenting on his latest blather (my review of Black Swanhere, Bed of Procrusteshere).

His latest book Antifragile is driven by his discovery that there is not an English word for the opposite of fragile, which he thinks could not be 'robust' (this neologism is one of the few new ideas presented in this book, not that I think we need more new Taleb ideas). Fragile things lose a lot of value when mishandled, 'anti-fragile' things increase a lot in value when mishandled. He thinks this is very profound and therefore needs a book. The problem is that mishandle implies an adverse effect by definition, which is why there isn't a word for something that goes up in value when you mishandle it.

The concept of things increasing in value with small probabilities is well-known. Words used for this concept include: good luck (when preparation meets opportunity), lottery tickets, a home run, teenie (a low-delta option), eureka moment (scientists), ten-bagger (a stock that can increase in value ten-fold). These are compound nouns, and if English were German, these would all be one word. They are the basis for patent trolls, venture capital, oil drilling, poring over a sheet of financials, and dating (a single prince makes the many other tedious dates worthwhile). Having good luck, winning lottery tickets, is nice, but how to achieve this is not straightforward, and certainly not simply by being long lots of them.

So what to buy? Taleb chooses investments with small downsides and large upsides: penny stocks, distressed assets, and options. “You want investments that clip the left tail.”

An option has a truncated left-tail: it pays off zero or the stock price different than some strike price--always a positive number--but is not necessarily a bargain because the price is non-zero. In general this is why penny stocks and long option positions have lower-than-average returns (and distressed assets are not better-than-average), as lazy investors chase instant riches. Further, contra Taleb, it is not the quantifiability of lottery tickets, or the fact that they have a maximum payoff, that makes them bad investments: things with lottery-ticket type qualities with uncertain parameters such as internet business opportunities are generally a fraud with a poor expected return, and things like IPOs, or analyst disagreement (which have more of what Keynes and Knight called 'uncertainty'), are intuitively riskier and have lower-than-average returns (I document many of these in my book).

He doesn't identify key attributes of attractive, risky (oops, antifragile!) opportunities, just implies they are the ones that unlike options and lottery tickets, work well. In fact, he's anti-theory, so one supposedly finds them by random sampling (aka 'trial and error'). That's a strategy statistically proven to underperform, catering to the biases most investors have, why both day trading bucket shops thrive and low volatility investing works. As a self-help book it's like someone saying you should eat more sugar, a strategy many will find highly convenient.

The book is really a big spread argument that it's good to be long gamma, bad to be short it. Gamma is the essence of an option, why there's 'time decay' or theta, a predictable expense that anticipates the payoff times the probability. Gamma is the essence of when payoffs are convex, when a down moves means you lose X, but an up moves implies you gain 2X. Whether or not this theta is adequate for the gamma is whether an option is priced fairly or not, and asymmetric payoffs are never priced at zero. People generally pay too much for gamma, why historically the VIX has been about 1% higher than the SP500's actual volatility, and this implied volatility bias has been even higher in the tails. Being long options (positive gamma), especially out-of-the-money options, has been a losing strategy.

One key to understanding Taleb is the Freudian concept of projection: he applies his greatest faults to others. For example, he defines the "Joseph Stiglitz problem" as cherry-picking his prior statements to claim they predicted something when they did not, referring to Stiglitz's ill-fated Fannie-Mae prediction and subsequent recollection of calling the 2008 financial crisis in a later book. Yet Taleb himself did the same thing, as he criticized Fannie Mae for not understanding the embedded interest-rate option in their mortgage portfolio, but then claims he accurately predicted Fannie's failure. Prepayment risk is very different than collateral risk, and Taleb mentioned nothing about collateral risk prior to 2007, and instead alluded to the prepayment option problem. It's like a guy who says corn prices might increase because of risk from floods, and when a collapse in the dollar causes it's price to rise, states, 'I told you so.' Hindsight bias, name dropping, and pretentious mathematics, are all Taleb signatures he sees everywhere in others.

Another key to understanding Taleb is that he has a French post-modern tendency to write to impress rather than explain. He provides hundreds of loosely related anecdotes, reminding me of the Talmud quote that 'when a debater’s point is not impressive, he brings forth many arguments.' I actually agree with a lot of Taleb, such as the intractability of risk because it is endogenous, and I think he's vaguely libertarian like me, but he says so many inconsistent things that doesn't mean much (when he's right it's probably a good example of the Gettier problem).

Then there are the many confused or dubious assertions, such as that the improbable events that underlie his strategy of embracing Black Swans are both impossible to quantify and highly rewarding, or that fragility is like risk in that it is what causes things to fail and has a return premium but unlike risk is quantifiable, that finance professors don't understand 'real options', or that economists don't understand that f(E(x))<>E[f(x)], or that the biggest investing problem created by Markowitz is too much optimization. His equation for fragility has a couple of subjective parameters (K, and the density of alpha) that are unfalsifiable given his definition of Black Swans (its probability can't be estimated!), and equations with unknown parameters are like bad haikus, or rather, very helpful if you want to impress the mathematically challenged (in case you don't know math, jut ask him if a number of +0.23 is more than 1 sd above average, and what that implies for expected returns). Then there are the ramblings about lots of Greeks and 'street smart' traders. In his confused mind this all fits together like Euclid's Elements, but it's more like a non-humorous version of David Sedaris's Me Talk Pretty One Day.

Taleb often suggests it is good to be long volatility, things that gain from greater uncertainty (see his YouTube on this here). As the VXX has shown, while this has nice covariance properties with the stock market (going up in 2008), it has a horrible long run return. I bet many of the unfortunate investors who have ridden the VXX to zero over its existence have a copy of The Black Swan on their bookshelf (and you can extrapolate it backwards, and even if it started in 2006 it would be a loser). The 'long vega' bias simply isn't a good one. Another example: mathematician, publishing mogul and Taleb-fan Paul Wilmott's big advice during the recent financial crisis to buy volatility--it gains from uncertainty!--which was like recommending earthquake insurance right after the big one hits. Good trade, wrong sign.

The fund Universa, of which he is affiliated, states that it is no longer merely long volatility or gamma, but timingwhen to be long volatility or gamma. I'm sure all those investors who jumped in Universa circa 2009 would be surprised to know that's the strategy, but as part of management, he benefits from the gamma resulting from the asset management fees from investors fooled by randomness. He does have an excuse here, as he did write a book on that, so it's not like they weren't warned.

I checked on his book Antifragile back in late October on Amazon, and saw the reviews from those who got the pre-release version. A few reviews where negative, and in the comment section (you can comment on reviews, and comment on comments) Taleb himself was in there angrily responding at length to these negative reviewers, and his cult-like fans piled on. From a guy who writes in Antifragile that criticism should be welcomed, his response to criticism is consistently hysterical. A week later, one of the negative reviews was deleted, the poor sap didn't anticipate the venom from simple Amazon review. I have received many spirited emails over the years from his acolytes, and back around 2005 NNT himself sent my boss emails on two occasions telling him I was saying hurtful things about him on the interweb and that I must stop. He's got the skin of a mudskipper.

For example, a commentator on a negative Amazon review writes:

Please respond to Nassim Taleb's rebuttal and more clearly define your expertise and argument with the message of his book. I bet if you engage Mr. Taleb (once again, a rare honor) you will find that the both of you fall along the same lines of understanding. If you do not respond, it simply means that the review was an after-thought to retain review ratings on Amazon and not an honest intellectual review of the book.

That's the fawning tenor typical of his fans, and that kind of intellectual insulation doesn't encourage reality, let alone clarity, which Taleb notes is a major problem among other people. Taleb doesn't do himself any favors by responding to one review by noting that

This review is grounded in a fundamental error. It falls for the conflation described in the book between medicating and overmedicating, intervening and overintervening. The book NEVER says that mental illnesses should not be diagnosed in children, it says that it should not be OVERdiagnosed and OVERMEDICATED.

First, note the deranged use of CAPS, highlighting that he at least follows his own advice to not take Prozac. Then, note that his big idea on mental illnesses is that people should not over diagnose or overtreat them. True enough, given the meaning of the prefix "over", but if that's his point it's tautological. Given Taleb's fixation with word cognates, it's odd that he repeatedly makes these kind of errors. This kind of vapidity is why I think he's a blowhard.

One theme of the book is hormesis, the finding that things that are clearly bad for you at extreme doses, are good for you in small doses; a glass of wine a day, radiation, germs, etc. If you have zero exposure to germs, you won't develop a healthy immune system. Arthur Robinson has been a lead of hormesis with his work in the 1970's, and there's a fascinating tale about how he discovered this in the context of the assertions about radiation extrapolation by Robinson's mentor, the famous chemist Linus Pauling, and a nasty legal battle that ensued. The fact that micro-instability is necessary for greater macro-stability is a very good, and very Austrian point. If he was a serious scholar he would fit his ideas into these threads and highlight his novelty, but as he has no novelty, he avoids this route. Though Taleb is trying to outflank academics he derides, his writings highlight one of the main benefits of academia where scholars usually fit their ideas into the literature so you can better assess their innovation and the state of the art. Autodidacts are often rambling, repetitive, and most importantly, wrong.

He notes there's a sweet spot for most medicines, and that some exercise is good for you, not in spite of its stresses, but because of them. I guess a lot of people find this really shocking advice (Moderation in all things! Who knew!?), so perhaps this is why his audience is so large: he's focusing on people without any common sense. But if the key to benefiting from the 'right' amount of medication is dosage, how does one find this dosage? Trial and error? That's how most animals learn, but it's pretty inefficient in general, I certainly don't want my kids figuring out most of their life lessons that way, because its very time consuming and costly. Surely, a 'moderate amount' of trial and error is essential in everything, so one is left with nothing useful (see CNBC video on AntiFragile and note there's no specific action item for any individual, just bumper sticker advice, e.g., 'small is beautiful').

He still thinks Portfolio Theory, and most Economic Nobel Prize winning research, is predicated on distributions with fixed parameters. It isn't. Financial academic standard bearer Eugene Fama spent half his dissertation in the 1960's on Mandelbrot's observation about fat tails, and like everyone else in the profession, left this thread because it isn't that interesting: the static parameter assumption gives qualitatively similar implications to a more realistic distribution where means have standard deviations ad infinitum, yet gains a great deal in transparency. Transparency and simplicity, in fact, are key features of models, always a tradeoff with realism, but that's a nuance too subtle for Taleb. The effect of adding fat tails through stochastic parameters is isomorphic to assuming more risk aversion or a higher volatility, so it's trivial to fit inside the box, and the CAPM and other theories are basically the same, just messier. The same is true for Black-Scholes-Merton and the Miller-Modigliani theorem.

As per correlations being stochastic and so 'uninformative', he is wrong again: they are highly predictable, as high beta portfolios formed using past data create portfolios with higher future betas. The same is true for low volatility investing. The problem with betas (ie, correlations), is not that they change so much as to be irrelevant, but that they aren't correlated with returns over long periods as theory suggests (the subject of my book, The Missing Risk Premium, that there are no omnipresent correlations between covariances and average returns). So, I agree modern academic finance is highly flawed, but not for reasons Taleb suggests.

A good amount of gamma, like having just the right amount of medication or specialization, is a good thing. Yet the right amount can be positive, negative, or zero, in various contexts. Many good things have negative gamma, such as the strategy of being nice to strangers: it has great downside, such as when you naively interact with an aggressive stranger, yet being nice is a good default strategy. Then there are things with no gamma, such as brushing your teeth everyday or simply being polite, which generally doesn't have a lot of effect either way in your life any time you do it, but over time is quite salubrious. Noting gamma per se, especially large gamma, doesn't tell you if something is good or bad, rather, just that it could be really good or really bad.

You can price gamma and it's not free, so the question is always whether this price is too high or too low. Indeed, Universa's new emphasis on timing volatility trading begs the question: how do you time these things? How do you price things that respond hydra-like to having its head cut off? Contra Antifragile I would say: don't bias your portfolio towards lottery ticket investments, even if only 10%. Find something you are good at, become excellent at it, and invest your time and speculative wealth there.

38 comments:

Eric writes: "The fact that micro-instability is necessary for greater macro-stability is a very good, and very Austrian point. If he was a serious scholar he would fit his ideas into these threads and highlight his novelty, but as he has no novelty, he avoids this route. Though Taleb is trying to outflank academics he derides, his writings highlight one of the main benefits of academia where scholars usually fit their ideas into the literature so you can better assess their innovation and the state of the art"

I actually like Taleb, but I do agree with your observation. Most good serious ideas are developed by people taking very seriously what others have both written and avoiding writing about.

One more to add to your list of pet peeves - I haven't read this book but my main complaint with his other books was the lack of focus on price - whatever the risk distribution there is a price at which it becomes an attractive investment.

Buying a basket of out of the money options priced at (say) $1 each might be a poor investment, but the same options at (say) $0.01 might turn this into an attractive strategy.

High risk or low risk or left tail or right tail assets are not intrinsically good or bad - it all depends on the price you pay for them...

I haven't written a 10k post yet. But 'obsessive stalker'? This from a guy who hunted down my boss, his email, and wrote a long private message, twice, to stop me from writing on the internet? He's the loon.

As mentioned, see "Projection". It underlies much of what he sees in others.

***Whether or not this theta is adequate for the gamma is whether an option is priced fairly or not, and generally people pay too much for gamma, why historically the VIX has been about 1% higher than the SP500's actual volatility, and this implied volatility bias has been even higher in the tails. Being long options (positive gamma), especially out-of-the-money options, has been a losing strategy.***

=> In my opinion you forget something important.It is not because vix is higher than actual volatility that being short gamma is the way retail investors should invest. In the long run, there is a positive expected value but "on the long run" isn't applicable for the retail investor. You can be broke, before you even realize, if something ugly happens (a few times).For example:You win 999.999 times 1$ and lose 1 time 999.900$. Obviosly, it is a winning strategy on the long run. But we cannot play it infinite. So a small investor can burn his hands and never recover during his lifetime...

2) It is the question if the skew in options reflects correctly the probability of "a black swan". I agree with Taleb that they don't. Calculate returns for the past 15 years tells you nothing. The sample is to small. The future is unkown an the past can't tell you anything.

3) The study you posted is "useless". They collect data from 1987 to 2005. Huh? Thats a huge bull market. I wonder what the results might be if you do this again with the market 1962 - 1984. That is longer than their used period, but the conclusions might be very different...Why do you extrapolate a sample of 18 years, mainly a very, very strong bull market?. If you select a favorable time, you will get "favorable returns".

Sorry for any grammatical errors, English is not my mothertongue (i'm from Europe).

I think your criticism is fair. Also your description of him as a kind of Tony Robbins for people without common sense (which is a large crowd), you've got a solid sense of humor.

That said I think you're too hard on him about some of his verbiage, yes he went nuts with the caps when talking about kids being prescribed ritalin or whatever he is talking about, but I'm not sure I disagree with him.

You're review is basically "He's either wrong because he doesn't take into account the pricing of gamma, or an asshole to people who do good work (Fama, etc...), or his points are common sense" I've read Black Swan and Procrustes and think that's probably right if this book follows the same arguments started there. That said I think his arguments.

Anyway I think my point is I like you, I also like Taleb, I'm still going to read both of your books (and generally have found both of your writing styles to be highly entertaining).

Just as a counterpoint to a few of the more evenhanded comments above, I don't think you were too hard on Taleb. I think pointing out that a "great thinker's" ideas are either tautological or intentionally without any form of meaningful context is a worthy public service.

I can forgive great personality flaws for people who are smart and have a sense of humor. The opposite is true for those that feign unique insight and happen to be overly sensitive jerks. I have read Taleb's other books to little effect but his personal style in promoting them (in which he would often imply that dissenters were actually just idiots who couldn't possibly understand) was what sealed my opinion of the man and his work.

Instead of the weird idea of ''antifragility'' (nonsensical to me) he could have simply adopted ''extremophile'' and find financial examples of it. Lifeforms (or financial assets) that thrive in an adverse environment, or in chaos, etc

LORD DARLINGTON. A man who knows the price of everything and the value of nothing.

CECIL GRAHAM. And a sentimentalist, my dear Darlington, is a man who sees an absurd value in everything, and doesn't know the market price of any single thing.

In modern version:

Falkenstein: What am I?

Taleb: A man who knows the price of Gamma, but cannot appreciate its value.

Falkenstein: And it is autodidactical blather, my dear Nassim, to see an absurd value in all Gamma, without knowing the market price you pay for it.

I think the truth is somewhere in between. There is a deep value to long Gamma, and a deep cost of short Gamma, more than is captured in option prices; but that doesn't mean every option is cheap, in fact options are usually expensive.

I am probably among the fawning, cult-like Taleb fans you denegrate, but I see value in both your books. Your column is clever and funny, and makes some good points, but I think you're basically wrong. Reading your review would help someone read Antifragile critically, I hope it does not dissuade people from reading it at all.

Antifragility is not gain from low probability events, and exploiting it does not mean buying options or lottery tickets. Most designed things are fragile, they rely on certain assumptions which makes unexpected events--higher wind speed than predicted for a bridge, unprecidented price movements for a business, a washed out road for a route plan--generally bad.

It is possible, however, to design things that gain from disorder, for which unexpected events are good on average. Evolution is the most obvious example, another is game theory solutions in which deliberate randomness is provably better than any deterministic decision. Antifragile is a discussion of these types of design, and a criticism of design that ignores the Antifragility principle.

In terms of projection, while no one would describe Taleb as encased in impenetrable Kevlar-and-Teflon armor, laughing cheerfully at criticism, I don't think your best friends would say that of you either. And you managed to work in a good bit of your own views on unrelated subjects, in what seems to be a version what you describe in Taleb as outflanking tactics. You are about equally an autodidact as Taleb, with a doctorate and extensive professional experience in the approximate field of your writings but drawing on much wider fields of knowledge in which you have no professional credential. Overall, to someone standing more than a few inches away, both you and Taleb belong to the same set of authors who write popular accounts of self-developed philosophies inspired by options trading and mathematical reasoning.

Aaron: I do understand that there are many smart people I respect such as yourself who like Taleb, including some in my office. It's like people I know and like who believe in things I find absurd or even evil, such as certain religions or socialism. I'm not like von Mises or Rand, who needs all my friends and colleagues to agree with me on philosophy or who we like. I have several friends who are good friends with a guy who had me in litigation for 1.5 years.

As to our similarities, yes, there are some, but as I mention in my book, I strangely find myself much more in agreement with Fama/Cochrane/etc. than their critics on things, even if we have a very fundamental disagreement. I get lots of anti-market types contacting me because I don't like the orthodox view, but our conversations don't go on very long because our source of disagreement with the standard view is so different we have almost nothing in common. I think if I got published in the Journal of Heterodox Economics, I would be convincing people who are irrelevant, so I don't bother. I'd rather convince one top finance professor than 100 bloggers. I haven't been very successful, but I have been right thus far on low vol investing, and if the risk premium is quietly abandoned in 50 years, and utility function more prominently oriented towards relative performance, I'll have real satisfaction regardless.

But, as he is very harsh on others, much harsher than me I think, I don't think being harsh on him is unfair. Further, I think he isn't honest with himself or his readers (eg, his fannie call), or has good faith, in that his antifragility equation is intentionally obfuscating, it just isn't useful, he's just blustering like someone who makes obscure references to Shakespeare and Livy to get an opponent to be quiet. I don't respect that style.

But most importantly, why I think this deserves public discussion as opposed to barroom banter, I think he's wrong in a profound way when you try to pull out a take-away. Sure, systems subject to selection pressures are more resilient than those that aren't, but it isn't clear what that implies for investing, or choosing a career, other than it helps to be very energetic and smart. The 'long gamma' via equal weighted teenies seems the kind of instinctive bias that drives the low-vol premium in stocks, as people gravitate towards the risky stocks with their speculative bets. People should be dissuaded from this, not encouraged.

I'm not optimistic I'll win the broad debate, which is fine, because I advocate low vol investing that anticipates this.

You got that exactly right. Taleb has always irritated me with his abiliy to prententiously go on with the uninteresting or the obvious. He's minted quite a career out of this image that he has created for himself and has sold to quite a few people.

I agree, you have as many differences from Taleb as similarities, and I don't think you're unfair. I view the two of you as useful point and counterpoint and hope people read both. I'm not writing for you as much as for your readers.

Eric, I am wonering if you could clarify the comment about analyst disagreement; "analyst disagreement, which are also riskier than average yet nonquantifiable have lower-than-average returns".I didn't quite follow that example of lottery ticket type investments. Thanks. This article was a very good description of some of the talebian flaws. Thanks.

I think you misunderstand the "timing" of Spitznagel's Universa. Look at the paper you site, he's saying there are no black swans and shows that all of the real drawdowns have come from basically overvaluation (whether you choose to subscribe to Spitznagel's Austrian thing or not). Spitznagel even seems to share many of your criticisms--saying in his paper that the takeaway is to sell expensive volatility. Universa is obviously much more nuanced than Taleb. I agree with pretty much everything you're saying but don't throw out the baby with the bath water.

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Of the Taleb books I’ve read I like his first one the best and even though many of his “Black Swan” arguments aren’t particularly novel, many were either new to me at the time or caused me to think about them more in depth. So…it was good for me.

And if nothing else, making a bundle on the ’87 crash, surviving cancer and writing a few bestselling books is nothing to sneeze at. He’s certainly a bit of a character which for better or worse is a trait that I find attractive in a world that now seems to be dominated by bland, affectless and conformist personalities.

More recently my enthusiasm for Taleb has been tempered - almost exclusively because of EF whom I think presents the most spirited, specific and comprehensive rebuttals.

Clearly Taleb can be a bit anti-social which originally I found refreshing in his popular media appearances but again, more recently this kind of thing seems to have blossomed into some really quite off-putting behavior. Here he is a couple weeks ago being quite abrasive to other financial writers whom I respect (dig into the Twitter feeds too if you want more): http://ftalphaville.ft.com/2012/11/19/1267633/deep-thoughts-by-nassim-nicholas-taleb/

I hope NNT (whom I’m sure will read this) will consider making the magnanimous gesture of offering to debate some of his favorite topics in a more civil and formal context (for all our benefit) and in the classical tradition which he so clearly loves.

You nailed it completely. Check out Taleb’s guest review of the new Mandelbrot book: http://www.amazon.com/Fractalist-Memoir-Scientific-Maverick/dp/0307377350/ref=sr_1_1?s=books&ie=UTF8&qid=1354231411&sr=1-1&keywords=mandelbrot

Choice quotes:

“Consider his huge insight about the world around us. ‘Clouds are not spheres, mountains are not cones, coastlines are not circles, and bark is not smooth, nor does lightning travel in a straight line’, wrote Benoit Mandelbrot, contradicting more than 2000 years of misconceptions.”

In other words, the big secret of the universe which no one else was smart or brave enough to perceive was that clouds weren’t spheres.

Then there is this gem:

“Mandelbrot, while a bit of a loner, had perhaps more cumulative influence than any other single scientist in history, with the only close second Isaac Newton. His contributions affected physics, engineering, arts, medicine (our vessels, lungs, and brains are fractal), biology, etc.”

I envite anyone who shares Taleb’s assessment to list one single major problem that was solved in some essential way with the help of fractals. The only real influence they ever had was in video game graphics.

Another great one was:

“The reader is made to feel he are [sic] at the center of twentieth century science as it was produced with fields invented almost from scratch: Max Delbrück with molecular biology, Paul Lévy with the mathematics of probability, Robert Oppenheimer with nuclear physics, even Jean Piaget the psychologist”

I don’t know about Delbruck or Piaget but, but it is flat out wrong to say Levy and Oppenheimer almost invented mathematical probability and nuclear physics from scratch. It’s about like saying Zuckerberg invented the internet from scratch.

Despite all the praise on Mandelbrot, his ideas in finance were pedestrian and thought of by many others (use Cauchy distribution instead of Normal distribution) or borderline numerology (power laws unlock the secrets of the universe)

Incidentally, although clouds aren’t spheres, the tiny suspended water droplets in them are spheres to an extremely good approximation. Even raindrops are spheres and not ‘tear dropped’ as usually portrayed. This fact has repeatedly been used by 19th century physicists to great effect when predicting the scattering of light in our atmosphere. Taleb’s a boob.

But "Small raindrops (radius < 1 millimeter (mm)) are spherical; larger ones assume a shape more like that of a hamburger bun. When they get larger than a radius of about 4.5 mm they rapidly become distorted into a shape rather like a parachute with a tube of water around the base --- and then they break up into smaller drops."

Taleb should be reviewed as the French (Levantine) cultural philosopher that he is, and not as a fund manager, that he definitely is not. Taleb is an abstract painting, Falken is analyzing it as industrial graphic art.

I dont fully get the point of your review. Do you want to say that the Fooled-Swan-Antifragility trilogy is a work "for dummies", or for no one?

If it is the former, one thing to note is that Talebs main aim is not uneducated people. On the contrary, its aimed towards (dumb) educated people. I have spent five years surrounded by these career oriented, "academic achievers". Their ability to handle a huge workload is extremely impressive, but Taleb is right: generally, these are the people that do not see the point of slack or redundancy outside the realm of what (very little) they have seen or been explicitly taught. They are generally the people lacking common sense.

If the academic achievers are the dumbest people of our society, why would it be bad to write a trilogy like this "for dummies"? To me, it rather seems very appropriate.

Well, I'm sorry about your work situatio. I don't work with people who don't understand fat tails, or that expected values include events with small probabilities, and never have. I guess those people do need help, and if this can make them understand some simple biases that is a good thing. But as the theme is to go long gamma, I imagine dummies will simply buy more lottery ticket-like investments as they always have, which doesn't really help them.

Duh, the theme of Antifragile is not to go long gamma, as you suggest Mr Falkenstein. (Aaron Brown already wrote it in one his comment).

Does it really bother you so much that options traders all over the world are familiar with, or at least they have heard of, Dynamic Hedging and other Taleb's books, whereas almost all of them reply "Falk-who?" when asked about Falkenstein? I found out about you only because of your extended criticism of Taleb, which I was very much interested in. Big dissapointment. Your writing is envious, emotional, and style-over-substance. Would suggest to drop the topic of Taleb, as you seem unable to, unfortunately for emotional reasons, handle it with proper understanding.

Also, I beg you to reread brilliant comment of Aaron Brown and your response. Re-read until you get the point.